Why Lease to Own to Millennials

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Originally ghost written for the Road Runner newsletter published Fall 2018.

When it comes to selling to the Millennial audience, many businesses are discovering they are unable to provide them with the right lending option for myriad reasons. Millennials are walking away from larger purchases and many brick and mortar stores are seeing a decline in business especially when it comes to this demographic. Understanding this audience and what they need to purchase large ticket items will increase sales and improve revenue.

Who are Millennials?

Millennials make up the largest portion of the population in U.S. history. Millennials are those born between 1982 and 2004. According to the U.S. Census Bureau, they now number 75.4 million, surpassing the 74.9 million Baby Boomers (ages 51-69). 1 Millennials are often divided into two groups, young Millennials (20-23) and older Millennials (32-35). Since they make up such a large portion of the population, it is imperative that retailers understand this demographic and cater to their needs.

Roadblocks to a Millennial Purchase

Millennials have several roadblocks when it comes to making larger purchases. Their average salary is 20% less than the previous generation, and their median net worth is 56% less. 2 Sadly, at the same time, college costs have increased dramatically, and the average student loan debt is $29,400. 3 This creates a generation saddled with debt and an inability to purchase larger ticket items.

In 2009, the Credit Card Accountability and Disclosure (CARD) Act was passed making it more difficult for younger Millennials to obtain credit cards. It restricted credit card companies from marketing to college students on campus and prevented them from giving incentives for signing up if they were under the age of 21. The change in marketing as well as other restrictions created under the same act, make qualifying for a credit card problematic at best. 4

As a result, the percentage of Americans under 35 with one or more credit cards is at the lowest since 1989, according to the Federal Reserve. The financial crisis also affected how Millennials view credit and many refrain from having credit cards altogether to avoid overspending. 5 The outcome is a generation that often has little to no credit history or poor credit.

One study shows that “two-thirds of consumers under 30 have subprime or non-prime credit scores and one-third of Millennials don’t have any credit history.” 6 If they need to purchase a large ticket item, many Millennials won’t qualify for traditional lending options that rely heavily on FICO scores. Retailers have felt the effects and watched as sales decline on larger ticket items. Few Options Available Millennials are left with few valid options when it comes to lending. Most companies haven’t kept up with their changing needs, and as a result, Millennials end up using less than optimal solutions, such as cash advance options, which only furthers their debt cycle. Many leasing companies have popped up over the years, but lack the stability or technology to cater to the needs of this demographic.

Why Lease-to-Own is the Perfect Solution for Millennials

An ideal solution to the difficulties posed by the Millennial generation is a lease-to-own option that allows those with less-than perfect credit greater purchasing power with an approval process designed to address their needs and concerns. Lease-to-own offers an alternative to traditional lending or finance, while offering Millennials flexibility

An ideal solution should provide the following:

• Mobile friendly

• No debt cycle

• An underwriting process that doesn’t solely rely on consumer credit

• Fixed term

• Flexible payments

• Ability to terminate

• Technology-based

• Early buyout options available

• Instant decisions

Progressive Leasing is at the forefront of understanding the Millennials and addressing their needs when it comes to making larger purchases.

To learn more about Progressive Leasing’s services, visit …

Research:

1. Millennials overtake Baby Boomers as America’s largest generation | Pew Research Center, Millennials overtake Baby Boomers as America’s largest generation, http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-babyboomers/.

2. Millennials earn 20% less than Boomers did at same stage of life https://www.usatoday.com/story/money/2017/01/13/millennials-falling-behindboomer-parents/96530338/. 3. Survey: More Millennials Say No to Credit Cards | Bankrate.com, More millennials say ‘no’ to credit cards, http://www.bankrate.com/ finance/credit-cards/more-millennials-say-no-to-credit-cards-1.aspx.

4. Student card survey: Offers fewer but more generous, Student card survey: Offers fewer but more generous, http://www.creditcards.com/credit-card-news/student-card-survey. php, CreditCards.com.

5. How Millennials Became Spooked by Credit Cards, https:// www.nytimes.com/2016/08/15/business/dealbook/why-millennials-are-in-no-hurryto-take-on-debt.html, NATHANIEL POPPER, AUG. 14, 2016.

6. Why millennials are often denied credit, Why millennials are often denied credit, http://www.cnbc. com/2016/10/24/why-millennials-are-often-denied-credit.html, Jessica Dickler